1. WORKFORCE SEGMENTATION Identifying the parts of your workforce which are critical to your business success Tool 7

2. Why is workforce segmentation useful as a Total Rewards tool?
Effective Total Rewards are targeted to employees in order to maximise the value and return on that investment. Workforce segmentation enables your business to identify key parts of the workforce and design rewards spend accordingly
Every business segments rewards to some extent, for example:
Leadership levels are always a segment with different rewards design, often including an LTI or greater bonus opportunity
Sales employees are also typically a segment as they are incentivised differently to other employees
Expatriates often have different benefits packages
For the purposes of this Total Rewards review the purpose of segmentation will be to identify your critical talent and consider the needs of that group as part of your review. For example, you may want to conduct specific cost or market analysis against a small strategic segment or communicate to them in a slightly different way
This tool is developed to help you think about who your critical segments are and then to test these thoughts with your leadership during the interviews. This initial review should take no more than an hour as a desk top exercise
Question - which employee segments do you already identify in current Total Reward strategy and application?

3. Total Rewards components
Why is workforce segmentation useful as a Total Rewards tool? It will help you answer these questions, which are central to the review:
Total Rewards components
Definition of Market
What is the appropriate labour market for this employee segment?
How available is required talent?
What unique pressures and trends are present in this segment’s talent market?
Pay Positioning
What is the desired market position for jobs within this segment?
How should it differ by reward vehicle?
Emphasis on Reward Elements
Which reward vehicles should be used? Base pay, Short-term Incentives, Long-term Incentives, etc.
What is the purpose of each vehicle? Does this differ by employee groups?
What is the appropriate mix of vehicles relative to target Total Rewards?
Careers and Talent
Have the requirements of this segment changed to meet business aims?
Are there any particular training requirements for this segment?
How critical is it to have top performers in this segment?
Differentiation
To what extent should rewards be differentiated based on individual performance?
Should individual performance differentiation differ by job?

4. Hot skills (market scarcity)
How are different segments defined? All segments can be identified by one of these categories
Organisational
Key talent
Preferences
Geography
Business unit
Division
Function
Leadership
High performers
High potentials
Hot skills (market scarcity)
Critical roles
Job family
Age
Gender
Culture
Career aspirations
E.g. you may have a critical business area central to the Market’s strategic goals
E.g. you may want to identify incumbents of a critical role where there is high competition for talent in the market
E.g. you may have a workforce with a high level of incumbents approaching retirement age who require particular benefits package to retain them

5. Examples of segments within these categories:
Segmentation by division
Segmentation by leadership and high potentials
Segmentation by age demographics

6. Criticality to the business
However, some segments will be of more importance to your Market Importance depends on their strategic contribution to drive business imperatives
Essential to the business:
Specialist knowledge and skills that can be “bought”
Critical to long-term business success, specialised skills or knowledge that must be recruited and / or developed
General knowledge and skills, not focused on strategic direction
Important to delivery of products or services, more readily available skills or knowledge
SPECIALIST
STRATEGIC
Determine roles unavailable on the market and with long internal lead time for development
Scarcity of Skill Set
NON CENTRAL / FLEXIBLE
CENTRAL
Criticality to the business
Identify people who contribute to the long-term strategic success of the organisation – if you don’t possess and nurture those specific groups, your strategic plan cannot succeed
For the purposes of this review, you should only consider those segments which contain CRITICAL TALENT for your Market

7. Talent segmentation decision tree These questions can help you position roles in the matrix
Is this position critical for your organisation?
Are these skill sets difficult to replace?
Non-central / flexible
Specialist
Central
Strategic No
Yes
Have greater impact on the organisation’s success
Directly linked to the organisation’s main mission
Provide a competitive advantage
General knowledge and skills, not focused on strategic direction
Essential to the business; specialist knowledge & skills that can be “bought”
Important to delivery of products or services, more readily-available skills or knowledge
Critical to long term business success, specialised skills or knowledge that must be recruited and/or developed
Sample Roles
Administrative support
Data specialist
Telecommunication line installer
Software engineer

8. Criticality of the role
How can you identify your critical talent?
Key questions to consider. Some of these are incorporated into the leadership questionnaire to give you another perspective on segmentation
What specific talent groups will be critical to achieving strategic goals?
What kind of talent will be needed?
How strong is your “bench”? Do you have enough to meet your future business needs?
What’s changing about your workforce demographics, and what is the impact on the business? (e.g. older employees staying in the workforce, different values of younger workers?
As you compare your current workforce with where you need to be in the future, where do you see gaps in the talent pipeline?
If you continue to maintain the way you currently hire, promote and retain employees, what will your talent gap be in the next three years?
Higher skills gap
Less critical role for the business
Higher skills gap
Critical role for the business
Skills gap - scarcity
Lower skills gap
Less critical for the business
Lower skills gap
Critical role for the business
We suggest that you attempt to populate this matrix for your population and then draw on feedback from the leadership interviews to test your thinking and finalise the matrix
Remember to consider skills of the future as well as the present
Criticality of the role

9. Tips to help you with the exercise
Illustrative example
TIPS FOR SUCESS
Here are three rules of thumb to remember when selecting your critical talent:
Talent relates to general roles within the organisation and NOT to specific people. Please don’t think about who your best people are, only which roles you need
Identify your workers that are in high demand internally and externally
Target individuals / roles that could not be replaced immediately
Don’t assume that because a role has high turnover that it is critical. It may be an indicator of how easily the incumbents can get another job
Don’t worry if the majority of your important roles are not identified as strategic. They will all benefit from the Total Rewards review
Higher skills gap
Less critical role for the business
Higher skills gap
Critical role for the business (now and in the future)
Relationship managers in produdt B
Relational sales
Customer analytics
E-Marketing group
Accountancy
Skills gap - scarcity
Lower skills gap
Less critical for the business
Lower skills gap
Critical role for the business
Legacy product technicians
Operations managers
Criticality of the role

10. Strategic Workforce Analytics
Appendix
Strategic Workforce Analytics
If through the course of the research you feel concern about your workforce structure and demographics, you may require further analytics. Outlined overleaf are three example analytics that Mercer regularly conducts for clients

11. 1.Internal labour market analysis
If workforce analytics is an area of interest there are additional investigations you may find useful, a few a listed below
1.Internal labour market analysis
2.Career pathways for high and low performers
Assess your career paths and identify any blockages and the impact of personal performance
This can be useful for understanding your workforce demographics both now and how it is developing
3. Age demographics
Understanding your critical workforce segments by generation
Please contact Mercer consultant Julia Howes for further information on Mercer analytics:

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